Question

The average total cost is to decline in the initial ranges of output on account of _________________.

• A. economies of labour
• B. economies of management
• C. economies of marketing
• D. all the above

Answer 1

The correct option is D all the above

In the long run as the firm grows in size it experiences cost advantages knows as economies of scale. These economies of scale include, economies of labor and management as if the firm is large and well known it can afford to hire more workers and due to its large size and reputation, it can also hire experienced highly efficient workers, this will help increase productivity and bring down average cost. It will also face economies of marketing as the fixed cost of marketing will now be spread over a larger quantity of output, thus reducing the average cost.